The Cost of Carbon Capture Sequestration

Size: px
Start display at page:

Download "The Cost of Carbon Capture Sequestration"

Transcription

1 The Cost of Carbon Capture Sequestration Allison Lim HSA10-5: Economics of Oil and Energy April 4, 2013 The US has relied on coal as a source of energy for hundreds of years. Due to stricter emissions regulations and cheaper natural gas, coal is becoming less lucrative. The U.S. will continue to rely on coal for electricity in the future only if coal can be cleaned efficiently and economically. We will examine the prices of cleaning coal and compare it to the current price of natural gas. This comparison will allow us to predict whether coal will remain in the US s energy picture. I. Electricity in the United States i. Sources of Electricity in the United States Modern society depends on electricity. The US alone generated 4.10 x kwh, or about 4 terawatt- hours in Coal, natural gas, and nuclear power are the biggest sources of electricity generation in the U.S. Figure 1 shows a breakdown of the electricity generation by source in the US. Coal and natural gas are the largest sources of electricity. While coal is currently the main source of energy, in recent years, natural gas has become a bigger part of electricity generation in the U.S. Figure 1: Electricity Generation by Energy Source 2012 Renewable energy is a small portion of the sources used for electricity. Solar, wind, and biomass together only generate 5% of the U.S. s energy. Figure 2: Electricity Consumption by Sector 1 U.S. Energy Information Administration. Last modified Accessed March 4,

2 ii. Uses of Electricity in the United States The three main sectors that consume electricity are residential, commercial, and industrial. Historically, the residential and commercial sectors have increased consumption. The industrial sector has alternatively remained relatively constant but decreased slightly in recent years. Figure 3 2 depicts these trends, as well as the appearance of the transportation sector. In recent years, electric and hybrid vehicles made the transportation sector a larger consumer of electricity. II. Emissions of Main Sources of Electrical Energy Each source s emissions are proportionate to their relative consumption except for coal. According the U.S Energy Information Administration, in 2011, coal was responsible 79% of Co2 emissions even though it only produced 42% of US electricity. Natural gas accounted from 19% of carbon dioxide emissions and petroleum accounted for 1%. Figure 3 compares the energy sources for electricity generation and the carbon dioxide emissions for each type. The U.S. s electricity issue is due to lack of resources; the US has both coal and natural gas reserves. Emissions from all sources, except renewable energy resources, are Figure 3: Electricity Generation by Source and Relative Emissions 2

3 severely detrimental to the environment. The three main sources of electricity- coal, natural gas, and nuclear power, all have hazardous emissions and by products. i. Coal Emissions Coal emits a range of hazardous byproducts. As discussed earlier, burning coal releases copious amounts of carbon dioxide. An average size coal power plant emits 2,249 lbs/mwh 3. In 2011, coal produced 1,517,203 thousand MWh. Simple calculations show that in 2012, coal released about 1.7 billion tons of carbon dioxide. In addition, coal released 9.8 million tons of sulfur dioxide, which causes acid rain, and 4.6 million tons of nitrogen oxides, a cause of smog. In addition burning coal releases particulates called fly ash that cause respiratory disease as well as mercury emissions. ii. Natural Gas Emissions Like coal, burning natural gas releases nitrogen oxides and carbon dioxide. However, because natural gas is just methane, it produces water and less carbon dioxide than burning coal. Natural gas releases only 1135 lbs/mwh of carbon dioxide. If natural gas were burned on the same scale as coal in 2011, it would have released 861 million tons of carbon dioxide, compared to the 1.7 billion tons released by coal. Natural gas also produces significantly less sulfur oxides and nitrogen oxides. However, the process of extracting natural gas, called fracking, is harmful to the environment. During fracking, chemicals can seep into groundwater, contaminating drinking water and harming the environment. iii. Nuclear Power Emissions While nuclear power does not actually release carbon dioxide, obtaining and purifying the fuel, uranium, does release carbon dioxide. However, the scale of carbon dioxide emissions is not close to that of natural gas or coal. Nuclear power does produce radioactive and unstable waste. Transporting and storing the waste is costly and can have 2 U.S. Energy Information Administration Independent Statistics and Analysis. October 2, EPA. "Clean Energy: Air Emissions." U.S. Environmental Protection Agency. Last modified October 17, Accessed March 4, and- you/affect/air- emissions.html. 3

4 strong negative effects on the environment if not done correctly. Unstable isotopes of Uranium are stored in mountains or other geological places considered safe until they can decay. The US has an abundance of natural resources for energy. The issue is the emissions and by products released from using these resources like coal and natural gas. In this paper, we will look at the economics of cleaning coal and how this plays into the US s energy future. III. Coal as an Energy Source in the U.S. Currently, coal is used primarily for electricity. However, the amount of electrical power generated by coal has been decreasing in recent years. This section will discuss the decline of coal energy production, the cost of coal, and the methods used to clean coal. In the past five years, less electricity has being generated by coal. Since 2006, the amount of electrical power supplied by coal burning plants has declined. 4 New emissions regulations increase the cost of running a coal plant. These costs will be discussed later in the section. In addition, coal mining has become more expensive as reserves are even harder to access. However, around the same time coal generation started to decrease, the energy produced by natural gas has increased steadily 5. Except for a brief spike in 2008, the price of natural gas has been declining since Almost simultaneously, electricity generated by coal has also decreased with the falling price of natural gas. Cheaper natural gas resources combined with more expensive mining have made coal less lucrative but still a major resource in recent years. i. Prices and Regulations Coal seems to be the cheapest energy source. In 2012, the average coal price was $ per kwh. Compared to other energy sources, with the exception of natural gas 4 U.S. Energy Information Administration. Electricity Data Browser. U.S. Energy Information Administration US- 99.A~ELEC.GEN.NG- US- 99.A&columnchart=ELEC.GEN.ALL- US- 99.A~ELEC.GEN.COW- US- 99.A~ELEC.GEN.NG- US- 99.A~ELEC.GEN.NUC- US- 99.A~ELEC.GEN.HYC- US- 99.A&map=ELEC.GEN.ALL- US- 99.A&freq=A&start=2001&end=2012&ctype=linechart&ltype=pin&pin=&rse=0&maptype=0 5 U.S. Energy Information Administration. March 29,

5 in recent years, coal appears cheap. However, government regulations are putting a price on the environmental effects. Coal releases extreme amounts of emissions as mentioned earlier. By mandating that coal plants meet certain emissions requirements, the government is effectively putting a cost on emissions. Recently, the EPA has initiated programs and rules to limit and regulate coal emissions. The Utility MACT requires emission controls for toxic air pollutants, while the Cross- State Air Pollution Rule (CSAPR) requires reduced sulfur dioxide and nitrogen oxides. The BACT requires permits for new plants that emit more than 100,000 tons of carbon dioxide annually, discouraging the construction of new plants. Both the Coal Combustion Residuals and the Effluent Guidelines limit the hazardous ash emissions from carbon. Finally, the Regional Haze requires Eastern power plants to have the best technology possible. These are not all of the restriction, but alone the added annual cost comes to around $170 billion 6. ii. Carbon Capture and Sequestration Cleaning coal generally means purifying the coal before it is burned, for this paper, we will refer to cleaning coal as cleaning the emissions after or while coal is burning. The most feasible and accepted method of cleaning coal is carbon capture and sequestration (CCS), or the long term isolation of carbon dioxide from the atmosphere through physical, chemical, biological or engineered processes. 7 Currently, the US has 7 small- scale CCS power plants in use. How does carbon capture and sequestration work? The goal of CCS is to remove carbon dioxide emissions and store the carbon dioxide in stable place. First, carbon dioxide is captured in one of three ways: pre- combustion, before the coal is burned, post- combustion, after coal is burned, and oxy- firing capture, where coal is burned in pure oxygen to produce carbon dioxide and water. The most feasible is post combustion since this technology can be integrated into existing power plants as well as new ones. This can reduce carbon dioxide emissions up to 95%. Once carbon dioxide is captured, it must be 6 American Coalition for Clean Coal Electricity. Major EPA Regulations Affecting Coal- Fueled Electricity. August issues- policies/epa- Regulations- August pdf 7 p43 5

6 transported and stored. Currently, most carbon dioxide is transported through pipelines. Oil fields and natural gas both use carbon dioxide transported in pipes for drilling or mining. 8 Storing the carbon dioxide is the final and most difficult step in CCS. Carbon dioxide can be injected into geological reservoirs deep underground. Here it can be adsorbed in porous rock and stored as both a gas and a liquid. However, environmentalists are concerned that carbon dioxide leaks can hurt ecosystems; huge leaks or failures would be extremely detrimental to humans and ecosystems 9. In addition, other harmful chemicals like mercury may be captured and stored with the carbon dioxide. These harmful chemicals can contaminate ground water, seeping into our drinking water and fragile ecosystems. The cost and challenges of CCS will be discussed in the next section. IV. The Cost of Clean Coal In this section, we will evaluate the cost of clean coal. If clean coal is cheaper than other sources of energy, then coal will be used to produce the U.S. s energy in the future. The initial cost of installing CCS, the most common and accepted method of cleaning coal, will be expensive. However, for the scope and intents of this paper, we will ignore this initial cost. Instead we will examine how much clean coal would cost annually, assuming CCS technology has already been installed. In calculating the cost of clean coal, we will consider the cost of capturing carbon dioxide, transportation, storing the carbon dioxide. Finally, we will compare the cost to the current and predicted prices for other sources of energy. i. The Cost of Carbon Dioxide Capture Carbon capture can be implemented several ways as mentioned in the previous section. For now, consider the cost of capturing carbon to be between $20-80 per ton of carbon dioxide 10. To calculate how much this would raise the price of coal for electricity, Environmental Effects. Bellona Environmental CCS Team. effects.html 10 CO2 Capture and Storage. IEA Energy Technology Essentials. December

7 we used the 2011 numbers for carbon dioxide emissions and consumption of coal 11. If approximately short tons of coal can create 1 kwh of power 12, then the price of capturing carbon is about $0.0102/kWh. Currently, the price of coal is about $ per kwh. Capturing carbon dioxide nearly doubles the cost of coal. In addition, capturing carbon dioxide also requires energy, possibly in the form of burning more fossil fuels. ii. The Cost of Transportation Transporting carbon dioxide can be done via ship, truck, or pipe. For large volumes of carbon dioxide, the best method is by pipe, 13 especially since oil companies as well as natural gas companies can then use the pumped carbon dioxide in mining or fracking. We will consider carbon dioxide is transported by pipeline. The price of transportation changes based on the length of pipe, diameter of the pipe, and many other variables, so estimates are difficult and often inaccurate 13. However, we pipeline transportation of carbon dioxide is similar to natural gas, except that it is not volatile. If we assume the average price for pipeline transportation of natural gas is $1 per mmbtu per 500 km, then we can estimate a price for carbon dioxide transportation. The density of carbon dioxide gas is lb/ft 3, so 1 ton of carbon dioxide is about mmbtu. The cost of transportation is approximately $ per km per kwh. Estimating the average distance of carbon dioxide transport to about 100 km, the price of transportation is $ per kwh. This price is highly variable depending on the distance, pressure, and diameter of the pipeline. However, carbon dioxide in this form can be reused. Small amounts of carbon dioxide can also be used by carbonated beverage companies or by oil companies for drilling. While there are some uses for carbon dioxide, most will go into storage and thus the price of transporting carbon dioxide will be high. 11 Total Energy U.S. Energy Information Administration. September 27, Frequently Asked Questions. U.S. Energy Information Administration. February 15, McCoy, Sean. T. "A Thesis Submitted in Partial Fulfillment of the Requirements of the Degree of Doctor of Philosophy in Engineering and Public Policy." Doctoral thesis, Carnegie Mellon University,

8 iii. The Cost of Storing Carbon Dioxide Current technology stores captured carbon dioxide in the ground, including under the ocean. Liquid carbon dioxide is injected underground into porous rock formations that trap the carbon dioxide. 14 Oil fields, deep coal seams and saline formations are all possible and abundant places to store carbon dioxide until it dissolves in water or turns into solids. Storing the carbon dioxide poses the biggest risk in the CCS process. Carbon dioxide leakage could pose global or local risks depending on the size of the leak, but there have been no known major leakages. 15 Storing and monitoring the site range from $2-10 per ton of carbon dioxide. This comes out to be around $ / kwh if we assume the average cost is about $8. There is additional cost in locating a proper storage site, drilling, and maintaining it, but this is just a rough estimate. iv. Cost Comparison The additional cost of clean coal under current prices and trends is $ per kwh, putting the price of coal at $0.072 /kwh. Cleaning coal is extremely expensive in comparison to the current price of coal. With all the new regulations being imposed and the cost of an environmentally friendly coal so high, coal is declining. Unless the CCS techniques can be made cheaper, coal will fade as an energy source in the US. For example, the current cost of natural gas is about $0.02/kWh at the wellhead. Factoring in costs like construction cost and other taxes, the price of natural gas is around $0.081/ kwh 16, making natural gas very competitive with coal. CCS can also be applied to natural gas, so natural gas appears a more lucrative source of energy than coal. If we can reduce the transportation cost of coal, we can continue to use clean coal to provide electrical power to the US. (2225 words) 14 Carbon Dioxide Capture and Sequestration. United States Environmental Protection Agency Storage. Bellona Environmental CCS Team. effects.html 16 Morgan, Jason. Comparing Energy Costs of Nuclear, Coal, Gas, Wind and Solar. Nuclear Fissionary. April 2, energy- costs- of- nuclear- coal- gas- wind- and- solar/ 8